This is a Golden Age for health care. But at the same time new treatments and cures are being developed, Americans are properly concerned about costs. How can the health care system continue to innovate while providing value?
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Our NewsletterIssue No. 65: Index Pricing Re-Emerges, in an Even More Virulent FormPresident Trump on Sept. 13 issued a new executive order that would set strict price controls on Medicare drugs. Pharmaceutical companies would be limited to charging here at home the lowest price that other wealthy countries pay. The White House has proposed variations on this theme before, but the new order is more expansive and, if it goes into effect, will push price controls to their most egregious. Medicare covers about 40 million older Americans, but the program’s policies often spread to commercial plans as well. If enacted, the change would be profound, and studies show it would hamper the ability of pharmaceutical manufacturers to conduct research at today’s levels. The order follows ambivalence within the Administration about imposing price controls, which have in the past been advocated by Democrats rather than Republicans. In its May 2018 blueprint, “American Patients First,” a comprehensive strategic document on reducing drug costs, the Department of Health and Human Services (HHS) expressed skepticism about the kind of index, or reference, pricing that is at the heart of the Sept. 13 order: In 2013, the World Health Organization published a paper describing the growing use of external reference pricing, or the practice of using the price of a medicine in one or several countries to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country. Every time one country demands a lower price, it leads to a lower reference price used by other countries. Such price controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing these policies. The crux of the matter, as the WHO paper states, is that price controls come at a cost, as we will see. Read More Here. |
What Others Are Saying"The anger directed at the pharmaceutical and biotech industries overall is misdirected. The single biggest driving force for increased health-care spending in the U.S. is the rising cost of labor, not drugs." "Even if pharmaceutical spending were rising as a share of total health care spending, but that rise was due to pharmaceutical investments driving down expenditures in other health care areas (e.g. a reduced need for more expensive surgeries), then it would still be inaccurate to argue that pharmaceutical spending is driving overall health care inflation." |
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Cost-of-Health-Care News (CHCN) was launched on November 30, 2016, with the aim of providing news and analysis regarding a critical public-policy concern: the costs and pricing of health care. CHCN is published by EAH Strategies, headquartered in Grand Rapids, Mich. CHCN is supported by Pfizer.